There are a couple of highlights in the budget for naval forces. Long-lead funding is required in fiscal year 1993 for an aircraft carrier to match fiscal year 1995 full funding of a ship that would ultimately begin construction in 1995 and probably deliver about the year 2004. Again, the objective is to maintain a 12-carrier fleet and this is the best business approach that ensures that the replacement rate is adequate.

The SSN-21 submarine profile is different than what you saw last summer, attendant to the Secretary's major warship review. This is a one-ship-per-year production program or construction program through the period 1992 to 1995 and then in 1996, it bumps up to two ships per year.

The DDG-51 profile is also slightly different than last summer. It was modified somewhat to ensure that we get the maximum competitive advantage.

Now, to the tactical air forces, the F-18 production budget reflects the decision to continue the construction rate of the F-18 as an interim solution, given the termination of the A-12 aircraft. There is sufficient funding contained in 1992 to 1996 to develop an E version of the F-18 for longer range, better night capability, et cetera. There is also funding contained in 1992 and 1993 to rewing approximately 60 A-6 combat attack aircraft to restore their full flight.

The advanced tactical fighter continues development with the full-scale development program beginning in 1992.

The F-16 request supports an orderly closeout of the program with the last 24 aircraft requested in fiscal year 1993 to meet the requirements we have for 26.5 tactical fight wings.

DEFENSE MANAGEMENT

Mr. Chairman, I would be remiss if we did not spend just a moment to let you know that there are other things that we are doing to reduce costs, in addition to just cutting back on our force structure or cutting back on major weapons.

And this has been an ongoing program since we prepared a defense management report for the President in early summer of 1989. It includes a large number of significant efforts to reorganize, restructure, and eliminate non-value-added tasks.

Perhaps the two most important elements in that are those tasks which allow us to have timely, comprehensive, and accurate information in order to do our job. And to that end, we are in the process of revitalizing and standardizing all of our data processing and corporate information management systems.

We feel we have invested very heavily in hardware, but we have not standardized on the sort of software systems throughout the entire Department which will enable us to do that.

And second, to consolidate our finance and accounting systems. You will probably recall that we have been under criticism that some of our financial systems do not give us the kind of total operating costs which enable you to make good decisions.

With these reorganizations we feel we will have that information at hand, and I think it is going to be a much better operating sys

tem.

Beyond that, we are coordinating all of our maintenance depots, to eliminate depots that do duplicative type of work. And we are consolidating and reorganizing all of our supply depots.

Perhaps one of the most important things we are doing is to take a whole new look at the way we conduct our research and development activities. One of the key steps that we are taking for the future is to recognize what has happened in terms of smart weapons and Stealth aircraft and cruise missiles, and to, in effect, make a major restructuring of the conduct of our research and development efforts to avoid duplication and to eliminate those areas that we are not putting as much effort into.

We have reorganized our contract management and we have consolidated our commissary operations. Now to give you an idea of the magnitude of these and the savings which we are envisioning, over the 1992-93 budget period, through the 1997 planning period, we estimate that reductions of approximately $70 billion in expenditures by DOD will be achieved.

And these will be achieved without taking out a single member of the Armed Forces or taking out any of the major weapons or reducing any of our aircraft or ships. These are savings in the way we do business, savings because of the efficiency of our operation. With that, I would like to stop and open it up to any questions that you might have.

[The statement follows:]

STATEMENT OF DONALD J. ATWOOD

Mr. Chairman, members of the Committee, thank you for this opportunity to discuss the Administration's fiscal year (FY) 199293 defense budget request.

America's crucially important military actions in the Persian Gulf these past seven months have been a vivid reminder of the consequences of the decisions that this and other committees of Congress will make regarding our nation's defense posture. Our shared responsibility is to ensure that in any future crisis U.S. forces will be able to perform as magnificently as they have in this one.

STRATEGIC OVERVIEW

During the past two years, the global security environment has changed dramatically. Many of the positive changes were made possible by the West's post-war strategy of containment, deterrence, and support for democracy around the world. In Europe, dramatic changes in the Soviet Union and its former satellites--if favorable trends prevail--will eliminate the threat of a massive, short-warning attack on our NATO allies. But elsewhere as well, the movement of Soviet thinking away from foreign policies detrimental to U.S. interests has made possible the revision of America's defense plans.

In response to the changing global security environment, a new defense strategy has been devised and approved by the President. The most significant new feature of U.S. defense strategy is that it is no longer focused primarily on the threat of Soviet-led aggression that would engulf Europe and probably much of the world. On the other hand, our strategy does take account of the uncertainty regarding the eventual outcome of the upheaval in the Soviet Union, and the massive Soviet military capabilities that we expect to remain for the foreseeable future.

While keeping a watchful eye on Soviet military power, the new U.S. defense strategy sizes our active and reserve forces principally against major regional contingencies that could threaten American interests. These threats have not diminished, as recent events in the Middle East have proven. And they have become ever more dangerous by the disturbing number of Third World countries with formidable conventional forces, and by the proliferation of ballistic missiles, and weapons of mass destruction--with chemical, biological, and even nuclear potential. Also continuing is the threat posed by drug trafficking and terrorism.

The defense budget the Administration is now presenting charts a path to virtually the smallest U.S. force level since World War II. We are confident that the capabilities these forces will possess are prudently matched to the threat we have been projecting. However, these forces represent the irreducible minimum to which our forces should be reduced; cutting below these levels would not leave us with needed capabilities, even under quite positive future trends.

Recent times have made us all keenly aware of how unpredictable the world can be. Should the security environment look less promising than we are now projecting, we may need to reassess our current plans for reductions through the mid-1990s.

While the threats to U.S. security are changing, the central goal of U.S. defense strategy should not change. Our goal remains--as it has for decades--to deter aggression against our nation, its allies, and its interests. To do that, we must retain a military posture designed to convince potential adversaries that we are capable of denying their hostile aims and that the cost to them of aggression would exceed any possible gain. Should deterrence fail, our strategy seeks to defeat aggression on terms favorable to U.S. interests.

What has changed in U.S. defense strategy is how we plan to deter and defeat aggression in the new global environment.

The major elements of the new U.S. defense strategy are:

• Strategic deterrence and defense. Given ongoing Soviet strategic nuclear modernization, America must continue to maintain a diverse mix of survivable and highly capable offensive nuclear forces. But we also should pursue a defensive system for global protection against limited ballistic missile strikes--whatever their source.

• Forward presence. Although the changing global environment allows us to reduce our permanent foreign deployments, some U.S. forces must remain deployed overseas in areas of U.S. interest. The forward presence of U.S. forces makes for more credible deterrence, promotes regional stability, and provides us an initial capability for crisis response and escalation control.

• Crisis response. U.S. conventional forces must be able to respond rapidly to short-notice regional crises and contingencies that threaten U.S. interests. That requirement will guide the stationing, size, and capabilities of U.S. conventional forces.

• Force reconstitution. Even though a global war against Soviet and Soviet-backed forces has become far less likely, we must maintain the ability to reconstitute a larger force structure if a resurgent threat of massive conflict returns. This requires us to retain those features of force capability that are most difficult to reconstitute (e.g., quality personnel and a capable U.S. industrial and technology base.)

America's defense strategy will continue to evolve as we monitor the many fast-paced sources of change in this new, but still emerging global security environment. Certain to endure, however, are the fundamental principles that have guided America's successful post-war defense strategy: deterrence, collective security, forward presence, prudent arms control, and steadfast American leadership.

OPERATION DESERT SHIELD/DESERT STORM

The 1990 budget summit agreement specified that incremental costs associated with Operation DESERT SHIELD are to be treated as emergency funding requirements, not subject to the defense the agreement. The President's FY 1992-93 defense reques projected long-term outlays do not reflect those costs DOD's eventual requirements as a result of DESERT SHIEL